Calm Day in the Bonds Market, T-Bills Stall As CBN’s Downward Reversal Of CRR Bills Issue Rate Remains

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FGN Bonds
The Bond Market had a relatively quiet session, with some slight demand at short to- mid-end of the curve, with little volumes passed. Most of the day’s interests were seen on off-the-run bonds like the FGN Nov 2029s which changed hands around mid-10% levels.

At the long-end of the curve, offers improved by 10bps with some trades happening on the 2034s paper at around 10.20%.

Consequently, yields expanded the benchmark bond curve, rising by a single basis point on the average.

We expect the market to continue to trade sideways in the interim, as the indicators which investors are on the lookout for (inflation, coupon payments, MPC meeting) are expected much later in the month.

Treasury Bills
The T-bills market also has a calm session, as the market participants remained in limbo following the reversal of the CRR Special Bills issuance rate by the CBN.

You will recall, that the Apex bank initially rolled over the maturing CPP Special bills at 2.00% on Monday, but reversed it and reviewed the issue rate down to 0.50% on Tuesday citing technical difficulties.

The CRR Special bills opened trading with 0.40% offers but with no interest from buyers who benchmarked the paper to the 91-Day NTB which came out at 2.00%.

Initial reports of a halt of OMO auction access to FPIs by the CBN rattled the market for most of the session, as participants weighed the potential effects of such a move by the CBN.

This prompted CBN officials to state the news as false, returning some calm to offshore investors on the day.

We expect secondary market activity to remain low tomorrow, as the market focuses on the expected OMO auction by the CBN to mop up excess system liquidity.

Money Markets
Money Market rates increased by c.274bps D/D as published system liquidity opened with c.N392bn positive. OBB/OVN rates closed at 7.00% and 7.63% respectively.

We expect rates to trend higher in tomorrow’s session, as we anticipate another OMO auction by the CBN to manage system liquidity levels.

FX Market
At the I&E FX window, the closing rate for the Naira appreciated by 63k (0.15% D/D) to close at N411.00/$ despite a 44% D/D drop in traded volumes

At the parallel market segment, the Naira continues to be under pressure following rumours of another official devaluation of the exchange rates by the CBN on the horizon.

The cash rate depreciated by N1.00 to close at N479.50/$, while the transfer rates remained unchanged at N493.00/$ to end the session.

Eurobonds
The NIGERIA Sovereign tickers traded on continued bullish sentiment, as we saw demand across the sovereign yield supported by a c.3.18% recovery in global oil prices. Yields dropped by an average of 3bps across the sovereign yield curve.

Conversely, the NIGERIA Corps tickers had a relatively quiet but weak session, with yields rising across most tracked corps paper.

The SEPLLN 2023s weakened the most, as yields on the paper increased by 166bps D/D. ACCESS 2021s and FBNNL 2025s recorded gains as demand resumed on both papers, causing their yields to dip by c.3bps and c.19bps respectively.

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